New joiner

Introduction to pensions

We want you to get the most from your Railways Pension Scheme (RPS) benefits, but we understand the world of pensions can be challenging and full of jargon.

Our Frequently Asked Questions (FAQs) section is here to help you understand your pension benefits, how to get the most from them and support you in making the right choices for your needs.

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What is a workplace pension?

A workplace pension is a way of saving for your retirement organised for you by your employer while you work for them. It is sometimes called a ‘company pension’, an ‘occupational pension’ or a ‘works pension’.

It's tax efficient - as the money you pay in, or contribute, to your pension is taken from your salary before tax is deducted, reducing the overall amount of tax you will pay on your salary. Your employer also has to contribute to your pension, so together you and your employer are saving for your future.

Put simply, a pension is a savings scheme that you pay into while you are working to help make sure you have regular money coming in when you retire.

Having a pension has always been important but never more so than now, with life expectancy getting ever longer. If you are hoping to retire at 60, or even 68, you could be looking to support many years without the regular income you had when you were working, with lots of people now living well into their 80's and beyond. Many of us don’t want to have to compromise our lifestyles in retirement, so taking an interest in your pension planning is a great way for you to do something positive for the future.

How does a pension work?

A pension works by taking all the money paid in – by you, your employer and the government (in the form of tax savings) – and investing it for your future. Different schemes work in different ways, but the idea is that the investments will grow over time to give you money to support you when you retire.

With some schemes, you choose how to invest your money and these are usually referred to as 'money purchase' or ‘defined contribution’ pension schemes. This means you have your own pot of money which can be used to provide an income when you retire. The size of the pot mostly depends on how much has been paid in and how well your investment funds have performed.

Other types of pension schemes work differently, and the amount you get when you retire will depend on things like how long you've been a member, your final salary when your retire, or the average of how much you've earned over your career. These pension schemes are commonly referred to as ‘defined benefit’ or ‘career average’ arrangements.

The Railways Pension Scheme (RPS) Shared Cost Sections are defined benefit sections, while the Industry-Wide Defined Contribution (IWDC) Section of the RPS is defined contribution. Regardless of which section you are in, once you're a member, you will have access to all the information you need to help you understand more about your pension.

Who pays into my pension?

Like many things in life, saving is a whole lot easier if you don’t have to do it alone. With a pension it isn’t just you saving for your retirement; it’s you, your employer and the government (in the form of tax relief).

The money paid into your pension pot* is known as 'contributions'. Contributions can come from:

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You (or someone paying in on your behalf, such as, your spouse)

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Your employer – which is a perk you won’t get with other savings schemes!

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The government – although there are lots of ways to save money for the future, a pension can often be the most tax-efficient one while you are working, as your pension contributions will receive tax relief from the government.

*Other than administration charges, all your money will be used for your retirement pot.

Who looks after my money?

Financial products don’t always get a good press. It’s comforting then to think the pension scheme has a group of people called the ‘Trustee’ who are responsible for looking after the scheme and all the money invested on your behalf. The Trustee is made up of employer and elected member representatives.

Their job, with the help of pension and investment specialists, is to regularly check how the Scheme administration and investments are doing and keep you informed of important information. Learn more about the RPS Trustee.

Although investment decisions made by the Trustee are still subject to stock market fluctuations, their experience and expertise ensures that the scheme investments are appropriate for members. They can’t, however, make investment choices for you personally.

How do I know I'm saving enough for retirement?

Take the time to think about what you might want or need for your retirement. By planning ahead, you can keep your pension savings on track for the future you want.

The lifestyle calculator in the myRPS section of this website can help you get an idea of the costs you might face. You can then compare these to the estimated income from your pension, which is shown in your Annual Pension Estimate or Annual Benefit Statement.

How much will I get when I retire?

If you are a member of one of the defined benefit arrangements, the benefits you get when you retire will depend on the rules of your Section. The benefits are typically based on your salary and service at retirement.

You can find out your Section’s rules in the ‘A guide for members’ booklet which you'll find in the 'My Library' section when you log into your myRPS account.

If you are a member of a defined contribution arrangement, you have several options when you retire. You can learn more about these options at pensionwise.gov.uk.

The amount of total benefits you’ll get depends mostly on:

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how much has been paid into it

the rules of your section of the RPS; and

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for defined contribution schemes like the IWDC section, how well your investments have performed.

You are currently allowed to take a tax-free lump sum when you retire. Your regular income will then be calculated from your remaining pot.

You can also ‘top up’ your pension by paying additional voluntary contributions (AVCs). Your employer will be able to tell you more about how to do this if you want to save more.

Once you’re a member you can register to use the myRPS area of this website. Here you’ll find information about your benefits, the rules of your section as well as handy tools to keep an eye on things and make changes as you need to.

Railway Pension Investments Limited (RPMI Railpen) is authorised and regulated by the Financial Conduct Authority for some of its activities. The administration of occupational pension schemes is not a regulated activity. Full details about the extent of RPMI Railpen's authorisation and regulation by the Financial Conduct Authority are available from us on request

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